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STRATEGIC CHANGE MANAGEMENT PRACTICES AT THE
MALAWI ENTERPRISE DEVELOPMENT FUND
BY
ALICK KANGWANDA KALIMA
A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTER OF
BUSINESS ADMINISTRATION, SCHOOL OF BUSINESS, UNIVERSITY OF
NAIROBI
OCTOBER, 2015
ii
DECLARATION
I, Alick Kangwanda Kalima hereby declare that this research project entitled Strategic
Change Management Practices at the Malawi Enterprise Development Fund is my
original work and has not been submitted in any other University or institution of higher
learning for any academic award such as Certificate, Diploma or Degree.
Signature: ………………………………… Date:…..……………………..
ALICK KANGWANDA KALIMA
REG. No.: D61/76940/2012
MBA PROGRAMME
SUPERVISOR’S APPROVAL
This research project prepared by Alick Kangwanda Kalima has been submitted to the School
of Business with my approval as the university supervisor.
Signature…………………………………... Date…………………….
DR. JAMES GATHUNGU PhD, CPS (K)
DEPARTMENT OF BUSINESS ADMINISTRATION,
UNIVERSITY OF NAIROBI, SCHOOL OF BUSINESS.
iii
DEDICATION
This MBA Project is dedicated to my mother Mrs Rita Kalima, my father Mr. Lufeyo Kalima
my wife, Litness Kalima and children, Yankho, Wongani and Aubrey Kalima.
iv
ACKNOWLEDGEMENTS
I sincerely thank God for the wisdom and good health throughout my study period at the
University of Nairobi. Secondly, I am highly indebted to my supervisor; Dr. James Gathungu
for his professional guidance without which this research project could not be a success. He
played a crucial role in guiding me, tirelessly providing positive criticism and expert
knowledge throughout the research project.
I also acknowledge with appreciation the support rendered by other lecturers and classmates
throughout my study period at the University of Nairobi. It was an exciting moment in the
journey of my life.
Lastly I am grateful to my Malawian friends in Kenya who rendered technical, moral and
financial support during my stay in Kenya. Among others I have to mention Richard
Manjanja, Leonard Ziondetsa, Justice Msopera, William Harawa, Rex Mlotha, Steve
Makatchaya, Lindah Kabwila and the staff of the Malawi Embassy in Kenya.
v
TABLE OF CONTENTS
DECLARATION ...................................................................................................................... ii
DEDICATION ......................................................................................................................... iii
ACKNOWLEDGEMENTS .................................................................................................... iv
TABLE OF CONTENTS ......................................................................................................... v
LIST OF TABLE ................................................................................................................... viii
LIST OF ABBREVIATIONS AND ACRONYMS .............................................................. ix
ABSTRACT .............................................................................................................................. x
CHAPTER ONE ....................................................................................................................... 1
INTRODUCTION .................................................................................................................... 1
1.1 Background of the Study ............................................................................................. 1
1.1.1 Strategic Change Management .................................................................................. 3
1.1.2 Microfinance Sector in Malawi ................................................................................. 4
1.1.3 The Malawi Enterprise Development Fund (MEDF) Limited .................................. 5
1.2 Research Problem ............................................................................................................. 6
1.3 Objectives of the Study .................................................................................................... 8
1.4 Value of the Study ........................................................................................................... 8
CHAPTER TWO.................................................................................................................... 10
LITERATURE REVIEW ...................................................................................................... 10
2.1 Introduction .................................................................................................................... 10
2.2 Theoretical Foundation of the Study .............................................................................. 10
2.2.1 Environmental Dependence Theory ........................................................................ 10
2.2.2 Competitive Advantage Theory .............................................................................. 11
2.3 Strategic Change Management Models .......................................................................... 12
2.4 Strategic Change Management Practices ....................................................................... 15
2.5 Challenges of Strategic Change Management ............................................................... 17
vi
2.6 Summary of Knowledge Gaps ....................................................................................... 19
CHAPTER THREE ............................................................................................................... 22
RESEARCH METHODOLOGY ......................................................................................... 22
3.1 Introduction .................................................................................................................... 22
3.2 Research Design ............................................................................................................. 22
3.3 Data Collection ............................................................................................................... 23
3.4 Data Analysis ................................................................................................................. 23
CHAPTER FOUR .................................................................................................................. 24
DATA ANALYSIS, FINDINGS AND DISCUSSION ......................................................... 24
4.1 Introduction .................................................................................................................... 24
4.2 Major Strategic Change Management Practices Adopted at MEDF .............................. 24
4.3 Strategic Change Communication within MEDF ........................................................ 25
4.4 Strategies put in Place to Manage and Spearhead the Change ..................................... 26
4.5 Celebrating/Rewarding Strategic Change Success at MEDF Ltd ................................ 26
4.6 Change Adoption Methods at MEDF ........................................................................... 27
4.7 Challenges of Managing Strategic Change at MEDF Ltd. ........................................... 27
4.8 Influences of Strategic Change Management ............................................................... 28
4.9 Threats and Opportunities ............................................................................................ 29
4.10 Discussion of Results ................................................................................................... 30
4.11 Comparison with Theory ............................................................................................. 32
CHAPTER FIVE .................................................................................................................... 33
SUMMARY, CONCLUSION AND RECOMMENDATIONS .......................................... 33
5.1 Introduction .................................................................................................................... 33
5.2 Summary of the Study Findings ..................................................................................... 33
5.3 Conclusion of the Study ................................................................................................. 34
5.4 Recommendations of the Study ...................................................................................... 35
vii
5.6 Limitations of the Study ................................................................................................. 37
5.7 Suggestions for Further Research .................................................................................. 38
REFERENCES ....................................................................................................................... 39
APPENDICES ........................................................................................................................... i
Appendix i: Letter of Introduction .......................................................................................... i
Appendix ii: Interview Guide ................................................................................................. ii
Appendix iii: University of Nairobi Letter of Authorization to collect data ........................ iv
Appendix iv : Organisation Chart of Malawi Eterprise Development Fund ...................... v
Appendix v: Map of Malawi Showing Location of MEDF Offices ..................................... vi
viii
LIST OF TABLE
Table 1.1: Summary of Knowledge Gaps ................................................................................ 19
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LIST OF ABBREVIATIONS AND ACRONYMS
ADKAR Awareness Desire Knowledge Ability Reinforcement
CEO Chief Executive Officer
GoM Government of Malawi
MARDEF Malawi Rural Development Fund
MEDF Malawi Enterprise Development Fund
MK Malawi Kwacha
MSB Malawi Savings Bank
OD Organizational Development
SME Small and Medium Enterprise
x
ABSTRACT
Strategic Change Management demands that a firm responds to the ever-changing and
turbulent external business environment in order to win competitive advantage over its
competitors. This entails doing business unusual by introducing various changes in the
organization. The aim of this research project was to establish strategic change management
practices adopted at the Malawi Enterprise Development Fund (MEDF) and the challenges
faced during the implementation of the change. The study employed case study approach and
eight top and middle level managers were interviewed using a comprehensive interview
guide. Data collected was qualitative in nature hence content analysis was used to analyze it
and draw conclusions. The study established that MEDF used both planned and emergent
approaches to change management. It was revealed that the organization changed its legal
status and mandate by obtaining a license to operate as a non-deposit-taking or cooperative
bank and computerized all its operating systems. The organization structure also changed at
MEDF by introducing new positions such as that of Deputy Chief Executive Officer/Chief of
Operations that never existed before. The study established that continuous effective
communication, training of staff and top management support led to successful change at the
institution. Stakeholders also rendered tremendous support throughout the entire change
process and that change success is rewarded through promotions of concerned staff members.
The study further revealed that major challenges encountered in managing change at MEDF
include inadequate resources and resistance to change by various stakeholders including
national treasury and some staff members. Political interference also emerged as one of the
major impediment to smooth implementation of the change management process. The
research concluded and recommended that during change management, there needs to be
stakeholder involvement to ensure ownership and the change should be unique to the
organization by building core competencies so that it wins competitive advantage over its
competitors. MEDF should also strive to be a learning organization by continuously
equipping its employees with requisite skills through training so that they are able to handle
any obstacles as they emerge during the change management process. The study further
recommends to MEDF to be aggressive in resource mobilization by submitting proposals to
potential funders such as the World Bank in order to bankroll its operations as it embarks on a
new path of doing business.
1
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Any human organization is best understood as an open system. An organization is open
because of its dependency on and continual interaction with the environment in which it
resides (Van De Ven and Poole, 1995). There has been increased uncertainty of the future.
The pace and scale of the change demanded of organizations have been enormous (Carnall,
2007). Demand for change remains high. Managers continue to strive for perfect change
management practices, as many continue to report alarming failure rates. Firms, like
organisms, must be “adept at adapting” or they will not survive (Carnall, 2007). Despite the
difference in strategy framework all strategies have one thing in common which is that they
all aim at maximizing the performance of a firm and by improving its position in relation to
other organizations operating in the same competitive environment .
Thompson (1997) argues that strategic change arises out of the need for organizations to
exploit existing or emerging opportunities and deal with threats in the market. Strategic
management decisions have complex implications in the operations of the firm; as a result
micro financial institutions are putting more emphasis and resources in coming up with
strategic change decisions which are aimed at taking advantage of opportunities in the
industry while at the same time remaining competitive. However, despite the best efforts of
the firms in developing strategic change plans aimed at improving their competitiveness it is
increasingly becoming clear that some of the change management practices and strategies
adopted by the firms are contributing towards failure of the firms to quickly take advantage of
the opportunities that arise thus rendering the firms uncompetitive. French and Bell (1978)
view change as a long-range effort to improve an organization‟s problem solving and renewal
2
processes, particularly through a more effective and collaborative management of
organization culture, with emphasis on the culture of formal work-teams. Some of the theories
that form the foundation of strategic change management include Environmental Dependence
Theory and Porter‟s Competitive Advantage Theory.
According to Kondalkar (2010), “Organizations must carefully observe the environment and
incorporate suitable changes the situation demands”. The external environment is literally the
big wide world in which the organizations operate. Whatever the nature of their business,
firms or organizations do not and cannot exist in isolation from the other organizations or
individuals around them - be they customers, competitors, employees or suppliers. On the
other hand, Porter (1980) points out that the key aspect of the firm‟s environment is the
industry or industries in which it operates. He argues that the intensity of competition in an
industry is neither a matter of coincidence or bad luck, but more a question of how that
industry is structured. He then proceeds to analyze the structure of an industry in terms of five
basic forces, which are threat of new entrants, threat of substitutes, bargaining power of the
buyers and that of the suppliers and rivalry among current competitors.
The Malawian business environment has been undergoing a number of changes that have
affected the manner in which organizations operate. These environmental factors are legal,
social, economic and political in nature. The micro finance sector has not been spared. For
instance the Malawi Parliament just passed the Microfinance and Financial Cooperatives Bill
into law creating an enabling environment in the finance sector and microfinance industry in
particular. As a result of this positive development, a lot of microfinance institutions have
sprouted on the money market creating competition.
3
1.1.1 Strategic Change Management
According to Thompson et al. (2006), strategy is defined as an organization‟s management
game plan for growing the business, staking out a market position, attracting and pleasing
customers, competing successfully, conducting operations, and achieving its targeted
objectives. Johnson and Scholes (2002) concur that, strategic decisions are normally about
trying to achieve some advantage for the organization over competition. Strategic
management is all about identifying and embedding in the organization those changes that
will ensure the long-term survival in the organization. Globalization of the world economies
has resulted in high environmental unpredictability. Environmental changes such as
advancement in information technological innovations, political, social and consumer
behavior have affected many organizations and they are being forced to enhance their
business processes in order to survive in an environment which has become very competitive.
All these coupled with the general ability to replicate both „hard‟ and „soft‟ innovations within
ever diminishing time scales, places the creative and effective management of change well
towards the top of the core competences required by any organization (Paton & McLaughlin,
2008).
Organizations are undertaking strategic changes in order to align their business strategies to
the environment and match the resources and activities of an organization to that of the
environment. According to Davis & Holland (2002), Strategic Change Management exists in
two basic forms: planned strategic change management and emergent strategic change
management. While planned change is proactive and consciously planned by management,
emergent strategic change management is concerned with the ever-changing, unpredictable
business environment. It is open ended and constantly keeps on aligning the firm with its
turbulent external environment. This type of strategic change management basically matches
4
its internal capabilities with its environment. It is also very important to recognize that
fundamental to the success of organizational change is the acceptance of the change by
employees. Strategy implementation does not automatically follow strategy formulation as
there is almost always resistance to any change.
1.1.2 Microfinance Sector in Malawi
Microfinance institutions provide a bridge between formal and informal financial markets in
most developing economies by using innovative ways of delivering financial services to the
poor. The innovations in the credit market introduced by the microfinance institutions include
simpler delivery mechanisms and forms of collateral or non-collateral, the concept of peer
group lending and joint liability, the promise of ongoing and increasing access to credit for
borrowers who repay in time (repeat loans). Most institutions offer credit at highly subsidized
interest rates, although in exceptional cases they match those of the informal markets (Chirwa,
2002).
The objective of micro credit programs basically is to ease the credit constraints of
households or to provide them with capital to invest in an activity thereby increasing their
income and consumption. Microfinance has become an important instrument for poverty
alleviation in developing countries including Malawi. According to Khandker, 1998 as quoted
by Chirwa, 2002, in many developing economies, lack of savings and capital make it difficult
for many poor people to engage in self-employment and undertake productive employment-
generating activities. The widely held argument in the development economics literature is
that formal credit markets tend to fail the poor due to the collateral requirements that the poor
cannot satisfy and due to the belief that the incentives to repay for the poor are limited given
the associated asymmetric information and high monitoring costs of micro individual
borrowers (Hulme and Mosley, 1996, Ray 1998).
5
Often the poor rely on informal financial markets such as moneylenders and rotating savings
and credit associations that have simpler terms of credit. However, the high cost of credit
from the informal sector implies that the poor cannot gainfully invest in productive income-
increasing activities. Interest charged by moneylenders in developing countries is several
times higher than those in the formal financial market. For instance, Chipeta and Mkandawire
(1991) observe that interest rates in the informal financial market in Malawi range from 300
to 1200 percent per annum, much higher than interest rates in the formal financial sector. In
Malawi, the Parliament recently passed Microfinance and Financial Cooperatives Bills into
laws. These Acts are the major legislative instruments that will regulate the microfinance and
financial cooperatives industry. In addition to passing the Bills, the Government has initiated
the Malawi National Strategy for Financial Inclusion (2010-2014). The National Strategy is a
long-term plan designed to facilitate the development of financial inclusion in Malawi.
1.1.3 The Malawi Enterprise Development Fund (MEDF) Limited
The Malawi Enterprise Development Fund (MEDF) Limited, formerly known as Malawi
Rural Development Fund (MARDEF) was established by the Government of the Republic of
Malawi with the approval of Parliament. It was launched by His Excellency the President,
Ngwazi Prof. Bingu wa Mutharika on 29th
January, 2005. After some strategic change
processes at MARDEF, MEDF was established on February 5, 2014 under the Companies Act
(Cap.46:03) (MARDEF Draft Strategic Plan 2009/10-2011/12).The objective of the Fund is to
assist those Malawians who wish to set up small businesses in the country by providing them
with financial resources as start-up capital or for expanding old businesses. The principal
business of the Fund is thus the provision of access to loan capital to the rural poor Malawians
who wish to set up or expand small businesses.
6
The Fund, which is of a revolving nature, particularly targets women, the youth and the
disabled as the main potential beneficiaries. The Fund was designed to achieve wide outreach
in all the three regions of Malawi to ensure equitable distribution of resources across all the
193 constituencies in the country based on population. The Fund‟s authorized operating
capital was put at Five Billion Malawi Kwacha (One Billion Kenyan Shillings) and Malawi
Savings Bank (MSB) was appointed as the Fund Manager and banker. It has a Board of
Directors and a Secretariat with four Regional or Divisional Offices across the country.
1.2 Research Problem
There are different types of change which can be applied to different organizations with
respect to the situation and problem that they are facing at the time. Cummings & Worley
(2009) indicate that change can vary in complexity, from the introduction of relatively simple
process into a small work group to transforming the strategies and design features of the
whole organization, and implementing organizational change generally requires additional
financial and human resources; particularly if the organization continues day to day
operations while trying to change itself. Academicians and practitioners agree that change is a
constant feature in organizations that would like to survive in their respective industry. It is
adaptive in the way it occurs, with only occasional more transformational changes. It is
beneficial for change to be incremental since such change should build on the skills, routines
and beliefs of those in the organizations. The members of staff, just like management, are also
likely to understand the change and be committed to it (Johnson, Scholes, Whittington, 2008).
The aim of Malawi government is to help its people improve their living standards. To this
end, MEDF was established on February 5, 2014 under the Companies Act (Cap.46:03).
MEDF which was formerly known as Malawi Rural Development Fund (MARDEF) has
largely managed to achieve that through credit provision to its clientele. However, there have
7
been challenges that have faced the program since its inception especially loan defaulting
which may make the program unable to run smoothly. There is need, therefore to understand
the underlying factors affecting the loan beneficiaries including business performance, socio-
economic factors, political interference, repayment infrastructure and follow-up measures as
well as disbursement levels, and find ways in which the management systems can be changed
so as to achieve the intended objectives of MEDF Limited.
Previous studies by Chipeta (1991) and Chirwa (2002) focused much on the macroeconomic
and informal sector and were published before important legislation was enacted by the
Malawi Parliament. The Malawi Parliament recently passed Microfinance and Financial
Cooperatives Bills into laws. These Acts are the major legislative instruments that will
regulate the microfinance and financial cooperatives industry. In addition, to passing the Bills,
the Government has initiated the Malawi National Strategy for Financial Inclusion (2010 –
2014). The national strategy is a long-term plan designed to facilitate the development of
financial inclusion in Malawi. In Kenya and elsewhere, Bita, (2011) studied strategic change
management practices in and performance at national Bank of Kenya Limited. Moseti (2013)
studied strategic change management in the Youth Enterprise Development Fund of Kenya.
Makau (2013) studied management of strategic change in international organizations in
Kenya. Muema (2013) studied the challenges of change management at Safaricom Limited.
Moseti, (2013) conducted a study on strategic change management and service delivery at the
Cooperative Bank of Kenya. Msenya (2012) studied management of strategic change at
Kenya Institute of Education. None of the above studies seem to have undertaken a similar
case a s my study and hence the research gap. The study, therefore sought to answer the
following question: what strategic change management practices have been adopted by
MEDF to respond to the changing environment?
8
1.3 Objectives of the Study
The study had two objectives, as follows:
i. To establish strategic change management practices adopted by the Malawi Enterprise
Development Fund (MEDF)
ii. To determine the challenges faced by the Malawi Enterprise Development Fund in
managing the strategic change.
1.4 Value of the Study
The study will form a basis for other researchers and academicians for further research and
generate knowledge in the area of strategic change management. An organization as an open
system interacts with the environment and is composed of a number of interconnected sub-
systems (Scott, 1987). This study seeks to show that any change to one part of the system will
have an impact on other parts of the system and in turn on its overall performance. It also
forms a basis for other related studies in that, other similar studies can be carried out be in
different institutions operating within the business sector in Malawi or elsewhere.
The findings of this study will help the Government of Malawi (GoM) and policy makers
ensure that the set objectives of MEDF are effectively and efficiently met. MEDF is funded
by taxpayers‟ money and therefore the resources should be put to good use for the benefit of
all Malawian citizenry. As the fund strives to become a limited company, policy makers ought
to know how to transform it so that it competes favorably in the money market. Furthermore,
the Malawi Government has embarked on Civil Service Reforms Program with an aim of
transforming the whole system so that it is more effective and efficient, hence the Civil
Service Reforms Commission (CSRC) can borrow a leaf or two on best practices at MEDF
Limited.
9
To the management of MEDF and other practitioners, this study has made necessary
recommendations on how to manage the change and challenges that the institution faces so as
to deliver effective and efficient services to the people of Malawi. The recommendations
made in this study will assist MEDF management make informed choices over which
strategies they should adopt and therefore ensure sustainable and relevant fund that is focused
on the development needs of Malawi.
10
CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
This chapter presents the theoretical foundation of the study, thus the information and
arguments from other researchers and scholars who have carried out their studies in the field
of strategic change management. It takes us through the Environmental Dependence Theory,
Porter‟s Competitive Advantage Theory, various Models of Strategic Change Management,
Strategic Change Management Practices and Challenges faced in managing Strategic Change
in organizations.
2.2 Theoretical Foundation of the Study
This study is mainly founded on two theories, thus Environmental Dependence Theory and
Porter‟s Competitive Advantage Theory. These two theories are preferred to others because
strategic change generally implies responding to the turbulent business environment hence
winning competitive advantage over competitors.
2.2.1 Environmental Dependence Theory
It seems hard to find a lesser used motto for saying that there is nothing constant except
change. The notion that change is ambiguous and something to prepare for stands in sharp
contrast to our abilities to observe, understand and manage change in organizations. Daft
(2010) suggests that managers can focus on four types of change within organizations to
achieve strategic advantage, which include technology, products and services, strategy and
structure and culture. To succeed in dynamic and active circumstances, organizations need
realignment and increasing of technical, political and cultural systems. Managers have three
basic tools with which to achieve these tasks as indicated by Tichy (1983); mission and
strategy, organizational structure and human resources management. When an organization
11
defines its purpose and goal and also has the main setting goal rising action strategies and
everything that refer to managerial processing require mission and strategy tools.
Organization structure refers to the way in which tasks are centralized and the way that
employees are in step to overcome tasks and process that utilize the structure of work. All the
program of training employees, performance assessment and setting prize and financial
rewards for them are passing on to human resources management tools (O‟shea & Connolly,
2004).
Kondalkar (2010) indicates that an organization is an open system that has to interact with
environment and is solely dependent on it, as any change in the environment makes it
necessary for the organization to incorporate change in internal systems, sub-systems and
processes. He continues to suggest that change can be brought about by external forces such
as political, economic and social cultural and internal factors that involve change of processes
to align themselves with the external forces. This study will look at the social, economic and
legal factors that necessitated strategic change at MEDF.
2.2.2 Competitive Advantage Theory
In practice all organizations are in competition in one form or another. Porter (1980) points
out that the key aspect of the firm‟s environment is the industry or industries in which it
operates. He argues that the intensity of competition in an industry is neither a matter of
coincidence or bad luck, but more a question of how that industry is structured. He then
proceeds to analyze the structure of an industry in terms of five basic forces, which are threat
of new entrants, threat of substitutes, bargaining power of the buyers and that of the suppliers
and rivalry among current competitors. Porter‟s Model is now used by many organizations in
their strategy formulation and especially in their assessment of strengths and weaknesses.
Most organizations compete through price where goods and services of a comparable quality
12
are offered at a lower price. Firms also compete by means of lower costs, where comparable
goods or services are produced with lower unit costs, thus offering the competitor the prospect
of higher margins on competitive prices, and putting them in the position of being able to
lower prices. Porter (1985) insists that satisfying buyer needs may be prerequisite for industry
profitability, but in itself it is insufficient. This study strived to establish which forces played a
role in the choice of strategic changes adopted by MEDF Limited.
2.3 Strategic Change Management Models
There are two main approaches to strategic management development. These are the
prescriptive approach and the emergent approach. A prescriptive strategy is one whose
objective has been defined in advance and whose main elements have been developed before
the strategy commences. It views organizational change as a process of moving from one
fixed state to another through a series of preplanned steps. The emergent approach on the
other hand, has been argued to be one in which strategic change management emerges, adapts
to human needs and continues to develop over time. It views change as a continuous, open
ended and unpredictable process of aligning and realigning the organization to its changing
environment. It recognizes the need for organizations to align their internal practices to the
external conditions. An emergent strategy is the one whose final objective is unclear and
whose elements are developed during the course of its life, as the strategy proceeds. Todnem
(2005) suggests that this approach is more focused on “change readiness and facilitating for
change” than for proving specific pre-planned steps for each change project and initiative.
The various models of managing strategic change fronted by various theories all aim at
describing the process through which organizations successfully alter their business practices,
their organizational structure, or their organizational climate.
13
Burnes (2004) argues that though most experts would claim some sort of universal
applicability for their favored approach or theory, the reality is that such approaches are
developed in particular circumstances, at particular times, often with particular types of
organizations in mind. Kurt Lewin‟s model of planned change is one of the cornerstone
models for understanding organizational change. According to him, resistance to change
could be overcome on an enduring basis by systematically planning and implementing the
process of change. The three step model was adopted for many years as the dominant
framework for understanding the process of organizational change (Todnem, 2005). The first
step of the model involves unfreezing the present level of behavior. It involves the loosening
of emotional links with the status quo, including old work methods and practices. It leads to
unlearning of old things to learning new ones. Unfreezing is achieved by increasing the
driving forces that direct behavior away from the existing equilibrium.
Robins (2003) purports that activities like motivation in preparation for change, building trust
and recognition for the need to change and actively participating in recognizing problems and
brainstorming solutions within a group can assist in unfreezing. The second step in Lewin‟s
model is taking action to change the organization‟s social system from its original level of
behavior or operation to a new level. Employees will be persuaded to be receptive to change,
change will then be introduced to them in a systematic manner and are guided and helped to
learn new techniques in the proposed change. Through this, individuals are able to internalize
new patterns of behavior, though force may be used in extreme cases. The final step involves
refreezing and takes place immediately change has been implemented to ensure change
sustainability over a long time. Individuals may revert to old ways if this is not done. Change
is stabilized if rewards and reinforcements are provided for desired behavior. Refreezing
involves reinforcing new patterns and institutionalizing them through formal and informal
14
mechanisms including policies and procedures, establishing feedback systems, ensure
leadership support and provide support and training in anchoring and adapting to new changes
(Robbins 2003).
Kotter (1996) outlines his eight step change model with suggestions to help organizations
transform. These steps include increasing urgency to inspire people to move and make
objectives real and relevant, building the guiding team, getting the vision right,
communicating for buy-in, empowering action, creating short-term wins, never letting
through fostering and encouraging determination and persistence, and finally
institutionalizing new approaches through making any changes stick. This study sought to
establish if any of these steps or actions were employed or adopted at MEDF Limited.
Perhaps one cannot successfully carryout a research study on strategic change management
without referring to the ADKAR model by Prosci (1998) which is founded on the idea that it
is people who change and not organizations. Successful change occurs when individual
change matches the stages of organizational change. According to the ADKAR model, for
successful change to occur at the individual level, people need to move through each of these
stages; Awareness of the need for change, Desire to make the change happen, Knowledge
about how to change, Ability to implement new skills and behaviors and Reinforcement to
keep the changes once they have been put in place. For organizational change to be
successful, these individual changes need to progress at or close to the same rate of progress
through the business dimension of change. This study sought to establish if there was any buy
in or consultation with employees in managing changes at MEDF Limited.
15
2.4 Strategic Change Management Practices
The strategic change management process means defining the organization‟s strategy. It is
also defined as the process by which managers make a choice of a set of strategies for the
organization that will enable it to achieve better performance. Strategic management is a
continuous process that appraises the business and industries in which the organization is
involved; appraises its competitors; and fixes goals to meet the entire present and future
competitors and then reassesses each strategy. To keep up with the fast-changing global
business environment, organizations have to reshape their ideas. Johnson et al (2008) argue
that designing a structure and putting in place resources will not ensure that people will make
a strategy happen. Managers have reported that the problem in managing change is inertia and
resistance to the said change. Nilakant and Ramnarayan (2009) discussed three ideas that will
influence individuals to participate in the change process. They argue that organizational
change is most successful when most people in the organization take charge of the change
process. Participation, involvement and ownership are critical to effective change. Similarly,
organizational change is both cultural and political and will involve influencing, inducing,
negotiating, persuading and winning people over to the change idea. Effective communication
strategies are also critical to mobilizing support towards the change idea.
According to Johnson et al (2008), there are various styles to change management, depending
on an individual organization. Coercion style involves imposing of change ideas or issuing of
edicts about change. It involves the explicit use of power to enforce the strategic change. This
style is necessary if the organization is facing a crisis or is in dire need of rapid
transformational change. According to Bowman and Asch (1987), power strategies are used
where change must be implemented quickly and few resources are available. This style of
organizational change is possible where the implementers of the change strategy possess some
16
form of power over other players in the organization. Burnes (2004), states that coercive
power is the prerogative of those in power. Junior members may control or hold back
information that enables them exert knowledge power. Selective and biased use of
information is effective in gaining willing compliance and cooperation from those it is
directed at. However, it should be noted that coercive power can be detrimental to
management of strategic change. Collaboration or participation is a style employed to increase
ownership of a decision and change process, as well as commitment. Those affected by
change are involved in identifying strategic issues, setting the strategic agenda, the strategic
decision making process or planning of the strategic change. This style leads to better quality
of decisions and consequently avoids resistance to the change.
Axelrod (2000) designed four approaches to strategic change management. These are the
leader driven, process driven, team driven and management driven approaches to strategic
change. The leader driven approach will apply to small and medium sized organizations,
where the leader posses all the knowledge and information about the organization in its
entirety. It is usually directive and non-participative. The team driven approach to change is
applicable to large firms with skilled and educated employees. This approach has highly
participative change efforts that seek to empower employees and provide them with
involvement, participation and ownership of the change. According to Axelrod, the change
management approach is a combination of expert driven and team driven approaches. The
former provides a business and technical focus to change, while the latter generates
ownership, involvement and commitment. This is the approach to change that most
organizations use today. Axelrod‟s shortcoming to this is that instead of involvement and
commitment, this approach breads pessimism, bureaucracy and resistance.
17
To manage change successfully, organizations need to be skillful in managing transitions.
Goodstein and Burke (1991) assert that the process of change management deals with aligning
people, resources and cultures, with a shift in organizational direction. During these
transitions, many organizations usually encounter many problems that cause delays and
additional costs, therefore affecting implementation of the desired changes. One of the biggest
challenges faced by firms going through changes is posed by resistance to change (Bovey and
Hede, 2001). Strategy implementation is the translation of chosen strategy into organizational
action so as to achieve strategic goals and objectives. Strategy implementation is also defined
as the manner in which an organization should develop, utilize and amalgamate organizational
structure, control systems and culture to follow strategies that lead to competitive advantage
and better performance. According to Porter (1980), organizational structure allocates special
value developing tasks and roles to the employees and states how these tasks and roles can be
correlated so as to maximize efficiency, quality and customer satisfaction-the pillars of
competitive advantage.
2.5 Challenges of Strategic Change Management
Fundamental to the success of organizational change is the acceptance of the change by
employees. Strategy implementation does not automatically follow strategy formulation as
there is almost always resistance to any change. Resistance to culture, leadership, teamwork
and stakeholder politics have been identified as factors influencing management of change in
an organization. Ansoff (1990) argues that resistance to change is a multi-faceted
phenomenon that introduces delays, additional costs and instability into the change process.
Resistance may be systemic or behavioral where systemic resistance is caused by among other
factors, organizational design, culture, resource limitations, fixed investments and inter-
organizational agreements. Systemic resistance originates from passive incompetence in
managerial capacity to carry out the change. The capacity required to implement change is
18
normally more than the existing capacity. Management requires planning and should develop
the required capability by integrating management development into the change process and
stretching the implementation period as long as possible. Behavioral resistance is exhibited by
individuals, managers or coalitions and power centers within the organization due to parochial
self-interests, misunderstandings and lack of trust or low tolerance to change. According to
Johnson et al. (2008), leadership must drive the process of change to alter the employees‟
perception and bring about revised personal impacts.
Kotter and Schlesinger (1979) proposed a more emergent view to tackling employee
resistance, stating that the circumstances of the change and the content of the change itself
will vary largely between organizations and that this should determine the appropriate
response. Rowe et al (1994) argue that team approach to change implementation removes
artificial organizational barriers and encourages openness. Teams that are cohesive, those that
interact cooperatively with members possessing compatible personality characteristics and
that are operating under mild to moderate pressure, are most effective. Kanter et al (1992)
argue that the first step to implementing change is coalition building which involves those
whose involvement really matters. Stakeholders must support any change program for it to
see the light of day. This is because many stakeholders are individuals or groups with
different interests and power in the organization, hence in case of a change, stakeholders
politics sets in. This study sought to establish the role of management and the extent to which
employees were consulted in the adoption and management of change at MEDF.
19
2.6 Summary of Knowledge Gaps
The following table shows a summary of similar studies that were carried out by various
scholars in Malawi, Kenya and elsewhere in the field of strategic change management. It
presents the type of study, its focus, the methodology used to collect data, study findings and
knowledge gaps in relation to the current study.
Table 2.1: Summary of Knowledge Gaps
Study Objective/Focus Methodolog
y
Findings Knowledge Gaps Current
Study Focus
Nyachot
i (2014)
Effect of
Strategic Change
Management on
Performance at
the National
Bank of Kenya
(Limited)
Case Study Planned
change and
strong
leadership
lead to
successful
change in an
organization
Focused on the
banking industry
which is highly
competitive in
Kenya
Microfinance
industry and
based in
Malawi
Kariuki
(2014)
Strategic Change
Management
Practices and
Service Delivery
at Co-operative
Bank of Kenya
Case Study Establishme
nt of Key
Stakeholder
Wide
Groups
(Teams) is
key in
managing
change.
Focused on the
banking industry
which is highly
competitive in
Kenya
Study focuses
on one
microfinance
institution and
its
management
practices
Moseti
(2013)
Strategic Change
Management
Practices and
challenges at the
Youth Enterprise
Development
Fund of Kenya
Case Study Team work
and rigorous
consultation
s with
members of
staff is key
to successful
change
management
. Poor
leadership
can lead to
unsuccessful
change.
Limited study to
a non-profit
making
organization.
Deals with the
microfinance
institution
which is profit
making in
nature.
Makau
(2013)
Strategic Change
Management
Practices in
International
Cross
Sectional
Survey
Planned
change is
easier to
manage that
Restricted study
to international
NGOs
Focus on
microfinance
and profit
making
20
Non-
governmental
Organisations
(NGOs) in
Kenya
emergent
change and
change can
take more
time to take
root than
anticipated.
institution
based in
Malawi
Muema
(2013)
Strategic Change
Management
Practices at
Safaricom
Limited
Case Study Excellent
communicat
ion is vital
before,
during and
after change
is
introduced
in an
organization
. Celebrating
change also
encourages
the members
of staff to
adopt
change fast.
Study focused on
a multinational
and highly
successful
company in a
very competitive
industry of
telecommunicatio
n
Study focuses
on one
microfinance
institution and
its
management
practices and
challenges
Msenya
(2012)
Strategic Change
Management
Practices
challenges at
Kenya Institute
of Institute of
Education
Case Study Digitization
of the
curriculum
encourages
e-learning.
Despite
planned
approach to
change,
management
should also
anticipate
emergent or
unplanned
change in
organistaion
Study restricted
to one
government
organization
which is non-
profit making
Study focuses
on one
microfinance
institution and
its
management
practices and
challenges
Chirwa
(2002)
Microfinance and
Poverty
Reduction in
Malawi
Cross
Sectional
Survey
Microfinanc
e institutions
have a major
role in
poverty
reduction
more
especially
among
vulnerable
Studied the whole
microfinance
industry
Study focuses
on one
microfinance
institution and
its
management
practices and
challenges
21
groups such
as women,
the youth
and ultra
poor.
Chipeta
(1991)
Informal Finance
Sector and
Macroeconomic
Adjustment in
Malawi
Cross
Sectional
Survey
The
informal
sector has a
crucial role
to play in
the overall
economy of
a country
Study focused on
the informal
sector and its
effect on the
entire economy
Study focuses
on one
microfinance
institution and
its
management
practices and
challenges
Source: Researcher 2015
22
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
This chapter presents the research design, which is the type of research that was conducted;
data collection that explains the nature of data that was collected; data collection instruments
and procedures of administering them and how the data was analyzed in order to generate
research findings for reporting.
3.2 Research Design
This research was based on a case study as it sought to study the strategic change
management practices adopted by the Malawi Enterprise Development Fund as the
organization responds to the changes in the socio-economic and political environments in
Malawi. All data gathered was therefore related to this organization. A case study is a
qualitative study that has been narrowed down to a specific unit but is comprehensive enough
to give representative information for similar units operating in the same environment. Young
(1960) defined a case study as a comprehensive study of a social unit, be it that unit is a
person, group, social institution, district or a community. Mugenda and Mugenda (1999)
argue that a case study is an in-depth examination of an institution. It is a method of study that
drills down, rather than casts wide; it emphasizes on depth rather than breadth.
The use of a case study in research is of particular importance taking into account the
advantages that come along with it. It is the easiest form of research, free from material bias,
therefore enabling the researcher to intensively study a particular unit. Owing to its focus on
detail, this research design was considered the most appropriate for the study in question as it
had the ability to reveal the aspects through which change management practices could enable
23
Malawi Enterprise Development Fund be relevant to the people of Malawi as a government
institution while at the same time competitive in the micro finance sector.
3.3 Data Collection
The case study approach typically combines data collection methods such as archives,
interviews, questionnaires, and observation (Yin 1989). This triangulated methodology
provides stronger substantiation of constructs and hypotheses. However, the choice of data
collection methods is also subject to constraints in time, financial resources and access. The
study relied heavily on both primary and secondary data. Primary data was collected by use of
an interview guide (appendix ii).
The interview guide was administered to the three senior managers who were sampled from
the MEDF employees at different levels. The said managers were; Chief Executive Officer
(CEO), Operations Manager, Finance and Administration Manager and Regional Manager for
the Centre. On the other hand, secondary data will comprised of information from the
institution‟s internal memos and circulars, strategic plan, credit policy, reports, newsletters
and workshop presentations.
3.4 Data Analysis
Data collected was qualitative in nature, and therefore content analysis was employed as its
preferred method of data analysis. Content analysis makes general statements on how
categories of themes of data are relayed. Content method of data analysis categorized phrases
and statements from respondents and used them to describe the logical structure and pattern of
expression which consequently helped ascertain any association, correction, denotations and
other interpretations. Mugenda and Mugenda (1999) argue that using qualitative methods,
researchers are able to collect data and explain phenomenon deeply and exhaustively.
24
CHAPTER FOUR
DATA ANALYSIS, FINDINGS AND DISCUSSION
4.1 Introduction
This chapter presents the results, interpretation and discussion of the study findings as
established from the face-to-face interviews with top and middle level employees at the
Malawi Enterprise Development Fund Ltd. In total, eight respondents were interviewed
including the Chief Executive Officer, Finance and Administration Officer, Operations
Manager and Regional Managers. Both primary and secondary data were collected by the
researcher. The qualitative data was subjected to content analysis and the researcher made
inferences from the views of the respondents in order to come up with this report. This
chapter also explains the findings in comparison with relevant literature as established by
other authors in the same field of study.
4.2 Major Strategic Change Management Practices Adopted at MEDF
The first objective of this study was to establish the strategic change management practices
that were adopted by the Malawi Enterprise Development Fund Limited. When the
interviewees were asked what major strategic change occurred and what informed the need
for organizational change at the fund, it was revealed that the fund was experiencing a decline
in performance due to various internal and external factors such as rigid operational
guidelines, fixed interest rates, lack of formal legal status and rapid developments in the
environment, among which are socio-economic, political and technological changes. Another
driver of change at MEDF is the fact that Malawi Government has embarked on Civil Service
Reforms with an overall objective of reviving the civil service so as to deliver quality public
services in an effective and efficient way. As such, MEDF wanted to be in tandem with recent
trends in Malawi by embarking on reforms. The interviewees revealed that the prevailing
scenario prompted the top management to check on the business areas that needed to be
25
changed and also on how to embark on the journey to recovery and sustainability. Following
this development, in February 2014, the then Malawi Rural Development Fund (MARDEF)
was registered as a company limited by guarantee and the name of the institution was changed
to Malawi Enterprise Development Fund (MEDF) Limited.
Change in the name was a major leap towards independence; a move towards privatization,
adopting a co-operative or strategic partnership model enabling MEDF to acquire a status or
license as a non-deposit-taking Micro Finance Institution with new product lines and flexible
interest rates. Among others, the new products that were introduced included youth loans,
individual SME loans, agriculture or farm input loans, civil servants economic empowerment
loans and motorcycle loans. This also allowed the institution to put in place more strict
assessment criteria and security requirements for potential loan beneficiaries. Another major
change was the computerization and digitalization of all the departments to facilitate speedy
operations. Management also facilitated the formulation of a new five-year strategic plan in
which a new vision and mission are stipulated reflecting the new focus from the rural poor to
cover the whole country with very little if any dependence on government funding to ensure
sustainability of its services. Also defined in the strategic plan are the operations, sources of
funds, new targets and sustainability mechanisms.
4.3 Strategic Change Communication within MEDF
The study sought how the strategic change was communicated within the organization and all
respondents unanimously agreed that excellent communication is crucial and should be
upheld before, during and after introducing any change. In support of this the respondents
indicated that there was communication through staff meetings, regional workshops, internal
memos, newsletters, stakeholder meetings, board meetings and announcements. Through
these forums major issues were communicated and feedback was provided to management.
26
This in turn has helped to eliminate suspicion, different versions, and mistrust which are
common during change. Asked about the role of communication, the respondents mentioned
the following; it enables early awareness of change, it enables early preparations-resourcing,
structure change, relocations, acquisition of requisite infrastructure, collaboration between the
stakeholders as well as eliminating resistance to change, making the employees part of the
change from the very beginning .
4.4 Strategies put in Place to Manage and Spearhead the Change
The respondents were asked what strategies were put in place to manage and sustain the
change and if any structures were modified to fit the change management process. In response
it was established that staff at both middle and senior levels were exposed to local and
internationally acclaimed microfinance trainings at reputable institutions such as Harvard
Business School, Boulder in Italy and African School of Microfinance.
It was also learnt that in a bid to increase efficiency and effectiveness, all offices are
computerized and systems digitalized. For instance, a loan tracking system is in place, the
accounting and human resource management systems are fully computerized and operational
support structures for delivery of loan services have been instituted in all districts in the
country. In addition a functional review was conducted with a help of a consultant and as a
result a job evaluation necessitated creation of new positions such as that of Deputy Chief
Executive Officer or Chief of Operations.
4.5 Celebrating/Rewarding Strategic Change Success at MEDF Ltd
Individual and group recognition is a necessary component of change management in order to
cement and reinforce the change in the organization. The respondents were therefore asked
whether strategic change success is celebrated and rewarded at MEDF and how this is done.
They agreed that strategic change management is recognized and celebrated to some extent in
27
MEDF. This is done through good recommendations, promotions and renewal of contracts.
Those that do not conform to change have their contracts terminated. For instance it was
learnt that one regional manager and senior loans manager had their contracts terminated
because of their mediocre performance. However some departments were of the opinion that
only senior managers take the credit and therefore the rewards.
4.6 Change Adoption Methods at MEDF
The respondents were further asked to state the methods that are used to ensure change is
adopted by all in MEDF Ltd. From the findings, restructuring, demotions, further trainings,
periodic evaluations with a view to find need to increase momentum, comparisons with other
better similar establishments , change in reward systems to tie rewards with performance were
cited as the change adoption methods.
It was learnt that a consultant was engaged to facilitate the formulation of relevant documents
such as Credit Policy and Strategic Plan which clearly stipulate each staff member‟s job
description. Periodic regional meetings are also conducted to ensure that each member of staff
understands and accepts the new way of doing business.
4.7 Challenges of Managing Strategic Change at MEDF Ltd.
The respondents were also asked to point out the challenges faced in the process of the
strategic change management. Inadequate financial and human resources for operations, time
allocated for the change, restrictive operational guidelines, low interest rates, high demand
due to new products, low loan recovery rate, resistance to change and political interference
were amongst the challenges mentioned. In addition the respondents said that some changes
heavily rely on external consultants who fail to understand the intended change, others get it
right but deliver late, others leave change midway. Mostly changes are anchored on corporate
strategy which, in this case was still under formulation. In some cases there was a degree of
28
fear and anxiety during change due to mistrust and this delayed buy in of the proposed
change. On political interference, it was learnt that in the first place some products in the fund
such as the much touted Youth Enterprise Development Fund (YEDF) was launched on a
political podium and politicians in the ruling party had an upper hand in identifying potential
beneficiaries and in which geographical area to concentrate the operations of the fund. It was
also noted that influential politicians were threatening professional workers at the secretariat,
regional and district offices of dismissal if they do not take instructions from „above‟.
The study found out that just like in any other organization, resistance to change is an issue at
MEDF. Asked on how the resistance to change was handled, the respondents said that timely
communication and training was the answer. The members would know quite long in advance
about an emergent issue and so no one was taken by surprise when the change came. This was
made possible through regional seminars or workshops which were attended by every member of
staff before any major change took place especially to those directly involved. Several training
sessions were organized and consultants invited to pass necessary information in preparation for
the change.
4.8 Influences of Strategic Change Management
Asked who influences change at MEDF Ltd and the kind of change it is, the respondents said that
change is mostly influenced by top leadership (management and the board), but has other times
been influenced by market demands, competition, and industry or government regulators, such as
the Reserve Bank of Malawi in its capacity as the Registrar of Financial Institutions. Global trends
have also influenced change in MEDF Ltd. Other stake holders like Parliamentary Committee on
Budget and Finance, Ministry of Finance and Ministry of Youth Development and Sports who
shape top management have influenced change because they have to approve and drive major
proposals.
29
In the same vein it was revealed that management at MEDF received tremendous support
from stakeholders in the introduction and management of the strategic change. Some of the
key stakeholders mentioned by the interviewees include Parliamentary Committee on Budget
and Finance, Ministry of Finance, the Reserve Bank of Malawi, Ministry of Youth
Development and Sports and Bankers Association of Malawi, and Beneficiary Groups. The
support came in different ways, for instance National Assembly had to pass the Microfinance
and Financial Cooperatives Bill into law thereby creating a conducive environment for change
in MEDF‟s legal status, the Reserve Bank of Malawi provided regulatory support in the
microfinance industry in its capacity as the registrar of all financial institutions in the country
and the Ministries of Finance, Education and Youth Development and Sports had to approve
key proposals in their capacity as mother ministries who also sit on the MEDF Board.
There is a possibility that cultural diversity in the organization may be an impediment to the
implementation of change. The researcher wanted to know from the interviewees whether
cultural diversity has had any impact on the implementation of change in the organization. It
is evident from the findings that MEDF is identified as an organization with several cultural
diversities from its employees. The respondents indicated that in order to reduce the chances
of multiversity becoming an impediment, the style of leadership and the culture of respect for
differences has enabled the organization to overcome this challenge. However, it was evident
from the responses that cultural diversity had very little if any influence on the strategic
change process.
4.9 Threats and Opportunities
In order to establish strategic fit and competitive advantage of MEDF in the external
environment the study asked the respondents to list threats and opportunities that exist at
MEDF Ltd. In response the interviewees mentioned the following as threats; low financial
30
literacy levels of beneficiaries, HIV and AIDS pandemic, shareholder interest, multiple
borrowing, poor road infrastructures in some areas, bad credit culture, unstable macro-
economic environment, and stiff competition in the microfinance industry.
The following were mentioned as opportunities that exist in the external environment; wide
catchment area (national coverage), high demand on the market for their products, liberalized
economy, political good will, Malawi Savings Bank countrywide branch network for loan
repayments, existence of a stable political environment, increasing demand for loans more
especially for the youth and women (special interest groups), Public Service Reform Agenda
by Government of Malawi, availability of potential funders and improved technology in the
telecommunications and banking sectors.
4.10 Discussion of Results
It was evident from the study that strategic change management at the Malawi Enterprise
Development Fund Ltd was driven by a number of factors such as internal weaknesses,
legislation, competition and technological changes. It is noted from the study that turbulence
in the environment led the fund to embark on strategic change. The fund was responding to
external factors hence the need to adjust its strategy in order to win competitive advantage in
the microfinance industry. As per the information provided by the respondents, MEDF used
the two approaches of managing strategic change that is planned approach and emergent
approach. It had been planned that the organization would eventually become a bank or
cooperative in the future projections. This information was retrieved from the organization‟s
draft strategic plan. During the implementation of the strategy, however, some issues emerged
that needed to be addressed for example new products such as farm input, youth and women
loans were introduced and the fund had to adjust accordingly. The need for change was
31
continuously communicated to all employees through staff meetings, workshops, consultant
briefs, internal memos and board meetings. The employees were trained to equip them with
the right skills to work efficiently and accept change. Management continuously provided
leadership throughout the change process which is in accordance with Axelrod‟s (2000)
assertion that some change in an organization is leader or management driven.
It was also established that resistance to change was a major challenge that was experienced
during the implementation of the change agenda. This finding is in agreement with Jones, (2010)
who says that resistance to change occurs at all levels of an organization. He also suggests ways
of handling the resistance depending on the cause of resistance. Resistance to change at MEDF
was attributed to fear of job loss due to lack of the necessary skills and unwillingness to leave the
comfort zone. Most of the employees lacked the necessary microfinance skills; others did not feel
comfortable parting with their friends who were earmarked to be transferred to the new branches
established across the country. The study also observed that resistance to change caused delays in
implementation, resulted in additional costs and reduction in performance. To address this
challenge, just as Kanter et al (1992) argue, management at MEDF strived to build coalition with
various stakeholders. The employees at MEDF were also equipped with various skills through
training at both local and international level so that they could understand and embrace change.
The other constraint observed in the study was lack of adequate financial resources. A lot of
money was required for new operations; pay the trainers and external consultants especially
those who were facilitating the strategic plan and credit policy formulation. There was also
very high demand of the organization‟s services due to new products on the market; thus
youth, women and farm input loans. A comparison between threats and opportunities showed
that MEDF is strategically poised to succeed in winning the competitive advantage because of
the stable and favorable political climate and high demand for its services. However, its new
strategy should be cognizant of the high competition and unstable macroeconomic
32
environment in which it operates. High illiteracy levels of its clientele and bad borrowing
culture of loan beneficiaries should also be considered seriously when crafting the new
strategy.
4.11 Comparison with Theory
Fred (1997) stated that external environment scanning is crucial to identify and evaluate
trends and events beyond the control of the organization. MEDF is an open system that relies
on other institutions for its inputs and need the other institutions to consume its goods and
services. The organization needs the legislature to pass laws to create an enabling
environment, major banks to administer huge loans for its clients and customers to buy its
products. MEDF has competitors who influence lending rates, the central bank which
regulates the financial market and donors who attach strings to their funding. The
Environmental Dependence Theory is therefore applicable in managing strategic change in
this organization. On the other hand, Porter (2004) sees the competition as the core to the
firm‟s success or failure and highlights the importance of having a competitive strategy to
successfully position against the forces that determine industry competition.
Johnson and Scholes (2004) noted that communication was very important during strategic
change management process. They further noted that stakeholders needed to be regularly
briefed on the developments when planning and implementing a strategy to ensure successful
uptake of developed strategies. The findings of this research were consistent with the
literature as it highlighted the fact that as a result of effective communication within MEDF
and other stakeholders such as Parliamentary Committee of Budget and Finance, the Reserve
Bank of Malawi and Ministry of Finance, change was easily understood and accepted by all
except a few who were later trained to accept it.
33
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Introduction
This chapter presents a summary of the findings, draws a conclusion and recommendations
based on the research objectives and research question. The chapter concludes by highlighting
limitations, implications of the study and suggesting areas for further study.
5.2 Summary of the Study Findings
The study revealed that it was necessary for MEDF to undertake a strategic change. This
change was driven by external factors including the change in microfinance laws, competition
by other microfinance actors, and technological changes. There was, therefore, a need to
change the name from Malawi Rural Development Fund (MARDEF) to Malawi Enterprise
Development Fund (MEDF) Limited to reflect its new vision and mission. The results
indicate that competitive change strategies by MEDF are derived from an understanding of
the industry analysis as outlined in Porter‟s five forces framework; intensity of competitive
rivalry, threat from new entrants, threat from substitutes, bargaining power of buyers and
bargaining power of suppliers. The ultimate goal of competitive strategy is to manipulate
these factors in favor of MEDF.
Results also indicate that the top management supported the changes. They played the role of
crafting the objectives of the change, communicated the urgency of change and provided the
necessary financial and human resources. The employees were fully engaged in the whole
process which resulted in them supporting the change and implementing it successfully.
Employees positively embraced the change due to the good communication and the requisite
skills which the organization offered through training.
34
MEDF introduced many products and services to fulfill its new mandate. These included the
Youth Enterprise Development Fund, Farm Input Subsidy Program and Civil Servants
Empowerment Loans. Digitization or computerization of the systems also facilitated ease in
operations and structures were also altered by introducing new positions such as that of Chief
of Operations or Deputy CEO. External consultants were contracted to offer adequate training
to change champions and other employees on microfinance processes and procedures
including the use of the new information system. The organization also scanned its external
environment by analyzing threats and opportunities presented by its immediate and remote
environment. This is in line with the Environmental Dependency Theory as supported by Daft
(2010) who suggests that managers can focus on technology, products and services, structure
and culture in order to achieve competitive advantage. MEDF also faced a number of
challenges including resistance to change and inadequate resources to finance the operations.
Also notable among the challenges were internal politics which led to a slow down of the
change process.
5.3 Conclusion of the Study
The study sought to determine the strategic change management practices adopted and
challenges faced at Malawi Enterprise Development Fund. The study established that MEDF
followed both the planned and emergent approaches to manage the strategic change. This
supports Mintzberg et al‟s (2003) notion of strategy where they say that to manage strategy is
to manage change. In the process of managing change at MEDF emergent issues of farm input
subsidy and youth loans arose which had not been incorporated in the planned change. The
study also revealed that MEDF is faced with challenges that delay successful implementation
of strategic change practices. Chief among them being financial constraints to cater for
additional costs required to mainstream the new products and services introduced.
35
Effective leadership, continuous communication and training led to successful change
management at MEDF. The Strategic change management has enabled the fund to enter into
new territories and play the game by the new rules. This includes the re-arrangement of jobs,
roles, systems and structures. According to Porter (1985) these phenomena have necessitated
strategic changes in the way business is carried out by firms. A paradigm shift then and
whether welcomed or resisted needs to be managed and managers have to determine the
actual causes of resistance to change and remain flexible enough in their approaches to
overcome them in an appropriate manner.
5.4 Recommendations of the Study
Managers and executives should always strive on effective communication and awareness of
strategic change and focus on building core competencies in the organization during change
management so as to increase the chances of successful implementation, credibility and
sustainability. There is need to actively involve all stakeholders at all stages during planning
and implementation to bring a sense of ownership by all partners so that they should not feel
that the change has been imposed on them. Market research should also be conducted prior to
developing strategies to be adopted by the organization. The market research should
objectively identify challenges faced by the organization which will help planners in
developing the strategies which will help to respond to the challenges.
It has been established that resistance to change can cause major setbacks in strategic change
implementation. However, the study has confirmed that with proper practices in place, it is
possible to overcome the resistance that originates from employees and other stakeholders. It
therefore, implies that organizations need to put in place strategic change management
practices that can enable them reduce the chances of facing stakeholder resistance. In this
case, with proper communication and rapport, Ministry of Finance and the Reserve Bank of
36
Malawi as major stakeholders, should understand the strategic change that is taking place at
MEDF and should allow it to operate as a cooperative or non-deposit-taking bank without
problems.
Managers and executives should ensure sufficient allocation of time and resources towards
change management as well as proper planning to avoid failure to meet desired goals.
Changes that heavily rely on external contractors who fail to fully understand the intended
change, others get it right but deliver late, and others leave it midway, should also be
reviewed and redefined. In the light of the foregoing, MEDF should embark on a robust
resource mobilization campaign in order to solicit adequate resources with which to bankroll
the change agenda. They should submit proposals to potential funders such the African
Development Bank, the World Bank and the Government of Malawi through Ministry of
Trade and Industry. These institutions exit for that purpose and therefore, MEDF should not
shy away from approaching them as this is the route other leading microfinance institutions
have taken to finance their major projects. As for political interference, MEDF should
continue to act in a professional and non-partisan way by engaging the politicians and
justifying why political influence should be avoided as it jeopardizes the operations of the
fund through low loan repayment rates. Another way of reducing or avoiding political
influence is for MEDF Ltd to operate as a commercial entity geared at maximizing
shareholder value with an independent board of governors.
In a nutshell, the implementation of strategic change management at MEDF is progressing on
well. However, the fund should strive to adopt a learning organization model whereby
members of staff will need to be continuously learning new skills as emergent changes will
always be expected to take place. The capability of the employees to change and adapt
whenever necessary enables the organization to win a competitive advantage over its rivalry
37
in the microfinance industry in Malawi. Above all, MEDF should strive to share notes with
the Malawi Civil Service Reforms Commission in order to learn and adopt best practices.
5.5 Implications of the Study
Financial resources seem to be the major challenge in managing strategic change at MEDF
since government through the Ministry of Finance used to be the sole financier of the
institution. The organization should strive to work for long term sustainability of its
operations. In other words, MEDF should wean itself from the armpits of government by
soliciting its own funding from other sources. The findings confirmed that financial resources
can be a major impediment in the successful implementation of strategic change in
organizations. This implies that if they are to succeed, organizations need to come up with a
resource mobilization strategy that can assist to overcome such crises.
It is also believed that resistance to change and political influence can pose major setbacks in
the smooth adoption and implementation of strategic change. However, the study has
demonstrated that with proper practices such as timely and effective communication and
leadership support can tremendously reduce these barriers. It therefore implies that managers
and executives should always strive to put in place strategic change management practices
that will reduce or minimize stakeholder resistance.
5.6 Limitations of the Study
This research was a case study and therefore the research was limited to Malawi Enterprise
Development Fund Ltd. Thus the findings on strategic change management practices and
challenges are limited only to MEDF Ltd and as such they cannot be generalized as remedies
to other firms.
38
The study focused on interviewing some of the very busy executive team members and
scheduling appropriate interview timings was a challenge, in some instances we had to keep
rescheduling the interviews. The researcher however, eventually managed to interview and
obtains information from the key decision makers of the company. It‟s also important to note
that the data collected from the respondents may have suffered from personal biases and may
therefore not fully represent the opinion of Malawi Enterprise Development Fund in some
cases. Some very important data necessary for this study may have been left out. The
interviewees also suspected that some of their secrets might be leaked to the competitors and
therefore chose not to disclose them. They also feared giving negative data about their
institution as this would lead to a reputational risk and loss of employment.
5.7 Suggestions for Further Research
This study sought to establish strategic management practices adopted by Malawi Enterprise
Development Fund Ltd and to establish any challenges encountered in managing strategic
change at the fund. Further research is recommended based on the strategic management
practices and the challenges in other institutions in microfinance industry in Malawi as well as
Central Africa. This will allow for generalization of the results.
Time brings about emerging ideas and changes. The environment is also dynamic and may
bring about new strategic change management practices. This is due to the ever-changing
political, socio-economic, legal, technological and cultural landscape in any given setting.
This study can therefore be replicated after five or ten years to confirm if there are any new
changes on the strategic change management practices at MEDF Ltd.
39
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i
APPENDICES
Appendix i: Letter of Introduction
Dear Sir/Madam,
RE: REQUEST FOR RESERCH INFORMATION.
I am a student at the University of Nairobi pursuing a Masters degree in Business
Administration (MBA). I am undertaking a research project on Strategic Change
Management Practices at Malawi Enterprise Development Fund (MEDF) as part of the
academic requirements for the award of the aforesaid degree. I would be grateful if you could
spare a moment of your time and allow me to interview you using the attached interview
guide, to help me gather the necessary information. The information you give shall be treated
with utmost confidentiality and be used solely for this research study. A copy of the final
report shall be made available to you. Any additional information you might consider
necessary for this study will be highly appreciated.
In case of any queries pertaining to this research project, do not hesitate to call me on Tel:
+254715994934: E-mail: [email protected]
Thank you in advance.
Yours Sincerely,
Alick Kangwanda Kalima
ii
Appendix ii: Interview Guide
This guide seeks information on Strategic Change Management Practices at the Malawi
Enterprise Development Fund (MEDF) since it was established in 2005 to date. I would
highly appreciate if you can respond to the questions below as briefly and accurately as you
can. Your answers will remain anonymous and strictly confidential, and will be used solely
for academic purposes. The final report of the research study will be made available to you.
SECTION A; PERSONAL DETAILS OF RESPONDENT
a) Interview Date……………………………………………………………….
b) Department…………………………………………………………………..
c) Your Position in MEDF……………………………………………………..
d) No. of Years of service at MEDF……………………………………………
SECTION B: HOW MEDF HAS BEEN MANAGING STRATEGIC CHANGE
1. What major Strategic Change has occurred at MEDF?
2. What necessitated the change?
3. How was the change communicated within the organization?
4 What is the role of communication in the strategic change management process?
5 What strategies did the Fund put in place to manage and spearhead the change?
6. Were structures modified to fit the change management process? Please explain
7. Was there resistance to change? Yes { } No { }
8. If YES, how has management been dealing with this resistance to change
9. Is strategic change success celebrated in MEDF? If so how is it celebrated?
10. What methods are used to ensure change is adopted by all in MEDF?
SECTION C: CHALLENGES OF MANAGING STRATEGIC CHANGE AT MEDF
11 What challenges is the Fund encountering in managing the strategic changes?
12 Is competition from other loaning institutions the most significant factor that poses a
threat to the survival of MEDF? If YES, please explain.
13 What are some of the threats that MEDF faces
14 What opportunities are there in the external environment for MEDF to exploit?
15 Do you always get the needed support of all other concerned departments/divisions
during change in your department?
iii
16 Do you face any cultural issues that affect change management in your department? If so
which are they?
17 Who influences change in MEDF? If any is it positively or negatively?
18 In your opinion do you think the management of MEDF had the support of the
stakeholders in the management of the strategic change?
19 In your opinion what other factors influenced strategic changes in the Fund?
Thank you for your time, cooperation and contribution to this study.
God bless.
iv
Appendix iii: University of Nairobi Letter of Authorization to collect
data
v
Appendix iv : Organisation Chart of Malawi Eterprise Development
Fund
Board of Directors
Chief Executive Officer
Deputy Chief Executive Officer /
Chief of Operations
Finance & Administration Officer Operations Manager (Youth
Enterprise Development Fund)
Regional Manager
South
Regional Manager
Centre
Regional Manager
East
Regional Manager
North
District Managers
South (9)
District Manager
Centre (10)
District Manager
East (6)
District Manager
North (7)
Credit Officers
(96)
vi
Appendix v: Map of Malawi Showing Location of MEDF Offices
MEDF NORTHERN
REGIONAL OFFICES
MEDF HEADQURTERS AND
CENTRAL REGIONAL OFFICES
MEDF EASTERN REGION OFFICES
MEDF SOUTHERN REGIONAL OFFICES
![Strategic Change[1]](https://img.pdfslide.us/doc/110x75/577d28f61a28ab4e1ea5a99a/strategic-change1.jpg)
